Black Horse Ride: The Inside Story of Lloyds and the Banking Crisis, by Ivan Fallon - book review

Robson Press £25

Under Lloyds’ bailout terms with the Government, it has to fund any of the overheads incurred in returning the funds to the taxpayer (Getty Images)

On Sunday 9 September 2007, an emergency meeting was called at the Treasury between the then Chancellor, Alistair Darling, the former Governor of the Bank of England, Mervyn King, and the ex-chairman of the Financial Services Authority, Callum McCarthy, to discuss a top-secret rescue plan of Northern Rock by Lloyds Bank.

Astonishingly, none of them was present; Darling called into the conference call from Edinburgh, King was on the line from Basel, and McCarthy’s second-in-command, Hector Sants, called from Oxford.

According to the minutes, it was a bad-tempered session at which King made clear his position; he was against a bail-out and dead-against the Bank providing the £30bn credit line that Lloyds wanted. What’s more, King dismissed the rescue with typical hauteur, explaining: “This is a remarkable idea. If any of us were to say we wanted to buy IBM provided you give me the money to buy IBM, we would dismiss the idea out of hand. Why are we even contemplating it?”

This is just one of many riveting stories which the financial journalist and former chief executive of The Independent, Ivan Fallon, tells in Black Horse Ride. What it also reveals is why Lloyds, one of the safest and most profitable – some would wrongly say boring – of the UK’s high-street banks was so eager to buy first Northern Rock, and then HBOS, which nearly destroyed it. Indeed, why Lloyds’ boss, Eric Daniels, by far the most conservative of our bank chiefs, went against all his instincts to agree to the HBOS merger has been one of the great mysteries of the financial crash. As Fallon explains, Daniels had been anti anything that smelled of high risk. He also knew that to keep Lloyds growing, he had to do a deal and his preferred option was to buy a European retail bank, but none of them wanted to dance at the right price. Of course, he would have loved more of the UK market but competition rules meant further expansion wouldn’t be allowed – until Northern Rock, and then HBOS, were presented to him on a plate.

Fallon asks the pertinent question, which is whether Lloyds would have agreed to the HBOS rescue if they had known it would bring losses of £40bn plus, or that Lloyds would end up being owned partially by the Government. He reports that, with hindsight, most of them say they wouldn’t have gone ahead. But not all.

Some still believe that the merger will eventually prove beneficial, but I would have liked to hear whether Fallon agrees. Even so, Black Horse Ride gallops away, is faster paced than most thrillers, and should be read by everyone remotely interested in what happened to British banking over the past few decades.